Trinidad and Venezuela have reached an agreement for the direct provision of gas by pipeline from Venezuela’s Dragon Field to Trinidad’s National Gas Company (NGC).

The August 25 gas supply agreement, which was signed in Caracas in the presence of the Prime Minister of Trinidad, Dr Keith Rowley, and Venezuela’s President, Nicolás Maduro, will see the export of natural gas from its offshore Mariscal Sucre plays located about 40 km to the north of Venezuela’s Sucre State, to a platform to the North West of Trinidad owned jointly by Shell and the Trinidad government.

Executives from Shell, which holds the rights to drill the Dragon field, were present at the signing.

The infrastructure for the project will be created through a special purpose vehicle to be formed and owned by PDVSA Venezuela’s state-owned oil company, Shell and NGC according to some media reports. Caribbean News Now reported that Shell’s pipelines will be used to transport gas from the Dragon field to the Hibiscus platform.

The new arrangement will enable Venezuela to monetise its natural gas for the first time on the international market and is expected to provide Trinidad with cheap energy supply at a time of falling reserves. No mention was made by either government of the financing aspects of the new venture or the price or terms on which Trinidad would be obtaining the gas.

According to Prime Minister Rowley, under the terms of the agreement the two countries will “take reasonable steps to facilitate the development of construction, operation and maintenance of one or more pipelines from the Mariscal Sucre area (…) including a pipeline from the Dragon field to Trinidad’s Hibiscus platform”.

In a television and radio address in Trinidad, following the signing of the gas deal, Rowley said that Venezuela’s gas reserves were economically and logistically more marketable from Trinidad than from Venezuela. “Success in such an initiative would provide an extension of our involvement in the gas business while it provides opportunity for Venezuela to monetise some of its gas which otherwise would not get to market in any foreseeable time frame”, he said.

He indicated that the agreement with Venezuela was based on a jointly agreed “competitive gas pricing mechanism” which would also allow for the development of “south coast cross-border fields which we share with Venezuela”. This would, he said, give Trinidad the “potential to grow in the medium term and diversify our gas supply base while immediately adding to the pool of what is available for current needs”.

According to a previous statement from PDVSA, the Dragon field has the capacity to initially produce about 150m standard cubic feet of gas per day (mmscfd) and is expected to eventually supply up to 300 mmscfd from four wells following the installation of an offshore platform.

The arrangement has political and strategic implications as it comes at a time when the US Administration is trying to isolate the Maduro government though sanctions and other measures.

The arrangement raised legal questions in Trinidad about whether the Venezuelan government has the right to sign an agreement without the approval of its opposition controlled National Assembly. In response to Parliamentary questions Rowley said that this was an issue for the President of Venezuela.

This is a lead article from Caribbean Insight, The Caribbean Council’s flagship fortnightly publication. From The Bahamas to French Guiana, each edition consists of country-by-country analysis of the leading news stories of consequence, distilling business and political developments across the Caribbean into a single must-read publication. Please follow the links on the right-hand side of this page to subscribe, or access a free trial.

Company Information: The Caribbean Council is a company limited by guarantee that is registered in England and Wales under registration number 4276621. It is registered for VAT in the UK under number 998253657. Its registered address is Temple Chambers, 3-7 Temple Avenue, London EC4Y 0HP.